Newsweek's 2012 Green Rankings: This time it's serious

Green rankings are difficult things to do, since companies vary so widely in terms of their operations, impacts, and supply chains. And Newsweek’s, while quite good, have their issues.

Take ManpowerGroup, for example. The self-described “world leader in innovative workforce solutions” garnered the highest environmental impact score of all 500 U.S. companies — higher than IBM, the top-ranked U.S. company overall, and 498 others.

Why? Because it has high revenue relative to its environmental impacts, says Salo — not because the company has necessarily engaged in exemplary environmental initiatives. The environmental page on its website describes primarily the company's green building initiatives. However, there’s likely more to the story: Last month, Manpower was named to the Dow Jones Sustainability Index for the fifth consecutive year.

On the other hand, the worst-ranked companies on environmental impact were dominated by financial institutions, including T. Rowe Price, which earned an Environmental Impact Score of zero, tied for last place with Peabody Energy, the world's largest private-sector coal company. How so? Because in Newsweek’s methodology, financial investors are judged by the company they keep — that is, the environmental impacts of the firms in their investment portfolios. By comparison, some chemical and heavy manufacturing companies, like Huntsman, Goodyear, and 3M, scored in the 40s and 50s in environmental impact. That's a bit of cognitive dissonance endemic of trying to apply consistent standards across every sector of the economy.

Another challenge is that supply-chain impacts didn’t seem to play as much of a role in the rankings. The information-technology companies that dominate the top of the Green Rankings — IBM, HP, Sprint, Dell, CA, EMC, and others — all received high Environmental Impact scores largely because they outsource manufacturing to others, keeping their corporate hands relatively clean.

As Salo writes in an article accompanying the Green Rankings:

The Foxconn factory in Shenzhen, China, along with other suppliers, manufactures Apple’s iPhone 5, which has sold millions of copies since its release this fall. The manufacturing of the iPhone produces pollution; who is responsible for that pollution? Is Foxconn responsible, since the emissions and waste derives from their plants? Or is Apple responsible, since it depends on the services of Foxconn? Both have some responsibility. Without Foxconn or the other suppliers, Apple would not have the iPhone to sell. Some responsibility also sits with the financial institutions that benefit from the shares of Apple stock they own. As the old saying goes, you are what you eat, or in this case, what you profit from.

That’s troubling, and undercuts the value of the Green Rankings somewhat. According to a 2010 Trucost study (PDF) for the United Nations Principles for Responsible Investment, of the $2.15 trillion of environmental damage caused by the world’s largest 3,000 companies annually, 49 percent comes from impacts hidden within supply chains.

Supply-chain information disclosure remains scarce, but is on the rise. “We had about 20 percent of companies disclosing information on their supply chain environmental impacts this year,” says Salo. “If you think about the fact that the greenhouse gas protocol for supply-chain reporting only came out a bit over a year ago, that’s pretty good.”

Next page: Measuring what matters